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For Different Car Markets, Who Will Be the Winner in the Second Half-year?

Date:07-27 13:48 Source:autochina.comnews.cn Authour:Zhu Shiyun

According to statistics released by China Association of Automobile Manufacturers, in the first half of this year the sales of local-brand automobiles grew significantly, by 27.28% on a year-on-year basis, accounting for 42% of the total sales. This is 5% higher than in the same period last year. German, Japanese, American, Korean and French cars shared the other half of the pie, with German, Japanese and American cars together taking 48% of the market, while the French, Korean and Italians combined to take 10%. What kind of shows will they put on to attract market interest in the second half of this year?

 

For Different Car Markets, Who Will Be the Winner  in the Second Half-year?

 

What kind of shows will different auto brands put on to attract market interest in the second half of this year?

In late July, with great expectations for China’s auto market, auto makers started to launch a new series of models. On July 20th SAIC-GM launched the all-new Cruze; on the 27th FAW-VW will unveil the price of the Next Generation Magotan. Also this month, the sales performance of different brands will be disclosed – revealing both winners and losers. With this new series of launches, auto brands will start to adopt different marketing strategies in their sales promotion. What kind of shows will they put on to attract market interest in the second half of this year?

According to statistics released by China Association of Automobile Manufacturers, in the first half of this year the sales of local-brand automobiles grew significantly, by 27.28% on a year-on-year basis, accounting for 42% of the total sales. This is 5% higher than in the same period last year. German, Japanese, American, Korean and French cars shared the other half of the pie, with German, Japanese and American cars together taking 48% of the market, while the French, Korean and Italians combined to take 10%.  

After the high-growth period ended, the accumulated experiences and marketing strategies of auto brands from different countries brought different results in terms of end sales, and are also having a profound impact on future trends.

German brands: SUVs are not their winning formula

With only two joint ventures in the mainstream market, Volkswagen and the three luxury brands - Mercedes, BMW and Audi - still have a market share of 20%, keeping German cars in second place all year round. At brand level, FAW-VW and SAIC-VW are always among the top 3 in terms of sales, and the only close rival is SAIC-GM. In the first half of this year, with a year-on-year increase of 3.19%, SAIC-VW was still 70,000 vehicles ahead of FAW-VW. Though remaining in second place, FAW-VW managed to emerge from the doldrums and achieved year-on-year sales growth of 11.68%.

Judged by rankings and sales statistics, German cars maintained their previous performance. However, the hot-selling models among German cars were quite different from other countries in the market. Among the top 10 German vehicle models, the Tiguan was the only SUV, contributing 5% of the total sales of German cars, while 9 sedan models including the Lavida, Jetta, Sagitar, Santana, Golf, POLO, Passat, Bora and Magotan contributed nearly 54% of total sales.  

In the current situation, where the growth of the sedan market is slowing down, how can Volkswagen keep on winning with this “weak” business model? One industry insider told China Auto that the reason lies in good product quality and the influence of Volkswagen’s reputation and the underlying strength of the ‘made in Germany’ brand.

It is worth noting that, the top 10 B-class cars in China in the first half of the year included luxury brands like the Audi A4, Mercedes C-Class and BMW 3 Series, while the Passat and Magotan took first and second place respectively. However, among the top 10 A-class cars, on which brand exerts less influence, there was no compact car promoted by the current luxury brands. This is an accurate reflection of the influence of German car brands.

As to the future, the insider indicated that any increase in the sales of German cars would depend on the B-class SUV and the C-class car Phideon to be launched by SAIC-VW next year. The B-class SUV will compete directly with its Japanese rival Highlander and its American rival Edge. Judging from the position of the Tiguan in the A-class SUV market, this B-class SUV produced by SAIC-VW will perhaps be offered at an advantageous price. “This B-class SUV will probably bring an increase of 60,000 vehicles to the sales of German cars, and the C-class car will likely compete with luxury-brand models like the Lexus ES and also bring a certain increase in sales.”

Japanese cars: hybrid cars coming to the fore

Due to the increase in the market shares of Chinese brands, foreign brands shares all fell to varying extents, with the exception of the Japanese, which have continued their upward trend since the beginning of last year and maintained a market share of 16%. Several Japanese brands achieved increased sales, among which Dongfeng Honda stood out with year-on-year sales growth of 48.53% in the first half of the year, while Chang’an Mazda, FAW Toyota, Dongfeng Nissan and Guangqi Honda all achieved a double-digit growth.

As Japanese brands previously took the US market as their main target, they had plenty of SUV models in reserve, allowing them to take full advantage of exploding demand in the Chinese market. On the SUV sales chart released this June, four models from Dongfeng Nissan, Dongfeng Honda and Guangqi Hongda were among the top 10. Of the total sales of the 10 best-selling Japanese cars, SUVs contributed 26%.

The insider also indicated that as well as successful models, the successful pricing strategy of Japanese cars was also an important driving factor behind their growth. Lacking compact SUVs, Toyota relies mainly on its sedan products. In the first half of the year, FAW-Toyota achieved a year-on-year sales increase of 17.73%. The entry-level price of its A0-class product Vios and the similar Yaris is RMB 69,800 Yuan, which is unusual among mainstream brands. In A-class cars, the Corolla and the Levin sell at an entry-level price of RMB 107,800 Yuan, lower than the Sagitar which is at the same level, and still lower than the Lavida which comes in at RMB 109,900 Yuan. Thanks to being priced lower than German cars, the Corolla achieved monthly sales of more than 20,000 vehicles.

It is worth noting that the 5,000-vehicle monthly production capacity of the domestically produced Corolla and Levin hybrids fell far short of market demand after they were launched. Once on the market, the two models each attracted 4,000 orders per month, showing how well they were received by the customer. At the Beijing Auto Show this year, Jiang Jun, FAW TOYOTA Motor Sales, told China Auto that the hybrid Corolla had struggled to meet demand ever since the launch, and that a buyer usually had to wait for two months after placing an order before picking up the car. “The main constraint on lead time is the battery. Perhaps it’s because we didn’t make sufficient preparation for the market.”

American cars: JEEP becomes the new high point

 

 

For Different Car Markets, Who Will Be the Winner  in the Second Half-year?

With production lines being continuously improved, the strong momentum of American cars has started to show. In the first half of the year, SAIC-GM achieved sales of 827,549 vehicles, up by 4.87% on a year-on-year basis. The Envision SUV and the all-new Excelle sedan, launched in 2014 and 2015 respectively, became the driving forces, contributing 13% and 20% of sales. These two models also climbed into the top 5 ranking in their respective market segments. Chang’an Ford maintained steady sales in the first half of the year, down by one percentage point on a year-on-year basis. But in terms of specific models, the sales of Focus, Escape and Mondeo all saw double-digit declines.

With the two major brands seeing stable development, any future increase in the sales of American cars is likely to come from the new domestically produced JEEP. Following its launch last November, the domestic JEEP Cherokee has achieved sales of 51,845 vehicles in the first half of this year, with a monthly average of more than 8,600 vehicles. In June this model ranked 21st among all SUVs. The insider indicated that the Cherokee had joined the ranks of mainstream models immediately on launch, and this had laid a good foundation for JEEP’s subsequent products. “Together with the Renegade, the Jeep Compass, which is about to be produced in China, is also one of the mainstream urban SUVs, and will continue to bring an increase in the sales of American cars.”

In addition to their core models, American cars have also been quite active in the C-class car market. Last year Chang’an Ford started to produce the Taurus in China, creating a sensation. This year, the launch of the new intra-class Buick LaCrosse by SAIC-GM also added spice to the competition. In the first half of the year Taurus achieved sales of 14,000 vehicles, close to FAW-Toyota’s Crown, while LaCrosse had sales of 33,000. Judging from the current situation, the future of mainstream-brand C-class cars is worth watching.

Korean cars: the cost-performance strategy comes under pressure

For Korean cars, 2016 has not been an easy year. In the first half Chang’an Automobile overtook Beijing Hyundai, and Geely Automobile pushed Dongfeng Yueda out of the top 10 auto makers. In the first half of the year Beijing Hyundai reached sales of more than 522,000 vehicles, up slightly by 2.45% on a year-on-year basis, and achieving 46.7% of the full year target. Dongfeng Yueda on the other hand, with 285,000 vehicles sold, suffered a year-on-year drop of 5.79%.

In terms of specific models, three of Beijing Hyundai’s biggest sellers – the Avante, Verna and Mistra - all experienced a double-digit decline on a year-on-year basis. The major SUV models Tucson and Hyundai IX25 contributed 24% of total sales. Dongfeng Yueda’s K3 and Sportage achieved year-on-year sales growth of 5.06% and 4.64% respectively, while the K2 suffered a year-on-year drop of 16.89%. The K4, which is on the same platform as the Mistra, sold 22,691 vehicles, down by 31% on a year-on-year basis.

Zhong Shi, an auto industry commentator, told China Auto that one of the reasons why Dongfeng Yueda had lost sales was that it had taken cost performance as its main selling point and had been weak in promoting an emotional attachment to its brands. When the competition in the market grew fierce, a competitive strategy relying on cost performance became less effective.

Cost performance has always been the main strategy for Korean cars. The Mistra, a B-class car, even ranked third with sales of 65,964 vehicles in the first half of the year, just behind the Passat and the Magotan. However the entry-level price of the Mistra is RMB 129,800 Yuan, lower than that of the Passat and even lower than that of the Accord, which comes in at RMB 169,800 Yuan.

The insider said that recently, the quality of Korean products had seen a significant improvement, with excellent design and upgraded materials and processes. In the United States and Europe the prices of Korean vehicles rise alongside an increase in quality, but this does not happen in China. “This has something to do with the position of Korean products in the Chinese consumer’s heart, which leaves Korean brands feeling quite helpless.”

Zhong Shi said that with competition in the market becoming ever fiercer, Korean brands will perhaps continue to play the cost-performance card in pursuit of growth. At some point, they will probably find themselves in close combat with Chinese-brand intermediate cars.


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